Thursday, October 12, 2006

Warner

At some point this morning it became clear the Mark Warner would not be seeking the Democratic presidential nomination for 2008. I'm not sure exactly when the first public announcement appeared, but here's a Reuters post stamped 9:55 AM.

As you might expect, the price of the Warner contract on Intrade (which would have paid $10.00 if he had been the nominee) collapsed rapidly from $1.50 to practically zero:

The price at 9:40 was $1.50; by 10:41 it was 11 cents. What's interesting about this is that the decline in price should have been matched by comparable increases in the prices of other contracts. Specifically, if the market believed that there was a 15% chance of a Warner nomination prior to the withdrawal, this probability should have been reallocated to other contenders once the announcement became public. This did not begin to happen for quite some time, and the process is still incomplete. The only contract to have risen significantly at this point is that for Edwards:

A sharp increase in price, from $0.81 to $1.28, took place during a ten minute interval starting at 11:33, about an hour after the collapse of the Warner contract. A couple of other contracts (Clinton, Bayh and Obama) have also seen modest increases but the main beneficiary of Warner's withdrawal seems to be Edwards.